Johannesburg - There is risk that South Africa’s total tax rate will increase in the future as pressure mounts to introduce new taxes on business to fund rising spending pressures, PwC Tax Policy Leader for South Africa Kyle Mandy said on Wednesday.
Mandy was speaking at the release of the latest edition of PwC’s Paying Taxes report in Johannesburg.
According to the report, South Africa’s tax rate is 28.8% which compares favourably with global and regional averages.
However, South Africa lags southern African counterparts Zambia (18.6%), Namibia (21.3%), Mauritius (22.4%) and Botswana (25.1%). The average total tax rate for the BRICS countries is 54.7%, he said.
The report has 11 years’ worth of data on tax systems in 189 economies around the world and looks at how tax systems have adjusted and developed in the global economy. It tracks trends in total tax rate, time to comply and the number of payments.
In South Africa, the total tax rate is made up of corporate tax, labour taxes - which include UIF, skills levies and workmen’s compensation - and other taxes, which include property tax and vehicle tax.
The average total tax rate in Africa is 46.9%, while South America has the highest tax rate at 55%, he said. The global average tax rate is 40.8%.
Mandy said South Africa’s relatively high profit tax of 21.7% is a source of concern as it was above the global and African averages of 16.2% and 17.7%, respectively.
The report said electronic tax filing and payments were the common tax reforms undertaken by countries worldwide in the past year. This eased tax payments for medium-sized enterprises as they embrace technology and reduce the compliance burden.
“Economies which have invested in online filing and payment infrastructure are reaping a digital dividend from these systems,” the report said.
Countries that have fully implemented electronic filing and payment systems saw an improvement in their compliance processes.
In the period between 2004 and 2009, the most common reform was the reduction of profit taxes. From 2010 to 2014, the focus is the introduction and improvement of electronic systems, the report said.
South Africa introduced an electronic filing system more than 10 years ago and this has seen the country reap the benefits of a streamlined tax system.
In Africa, South Africa is the leader in the number of tax payments due to the widespread use of electronic payments, the report said.